How Manufacturers Can Win by Embracing Change
This post for consumers is on the evolving lab supply manufacturer-distributor relationship.
It also provides information on how manufacturers can sell their products more effectively through the small and regional distributor channel.
The Evolving Market.
There are over 8,500 manufacturers in the U.S. alone making products for the laboratory market with approximately 80% of these companies having eight or fewer employees. The vast majority of these companies sell through distributors. The number of distributors went through a long period of consolidation and reached an inflection point around 2004. As Thomas Friedman states in his book, “Thank You for Being Late: An Optimist’s Guide to Thriving in the Age of Accelerations”, 2004 was an inflection point for many technologies and industries. Just one of his many examples is the smart phone which didn’t exist prior to 2004 and now is in the hands of billions of people. The lab supply industry is no exception.
What has changed since 2004?
Prior to 2004, there were a diminishing number of regional lab supply distributors who were slowly being bought up by big distributors along with many manufacturers. Since then, the number of local and regional distributors has grown substantially. Why has this happened?
- -The big distributors decided that they would focus on big customers and rely on their web presence and telesales agents to serve the not-so-big customers. This left some customers without representation.
- -The proliferation of web tools and technologies has allowed regional and independent distributors to be innovative and compete in the market.
Manufacturer Marketing – pre-2004
Prior to 2004 about the only way a small manufacturer you could get theirproducts into the hands of buyers was to make a personal pilgrimage to either Pittsburgh or Philadelphia and sell the category manager on why your company should be added to their portfolio of vendors and why your products are worthy of being in their catalog. It was around 2004 when the big distributors stopped printing their massive catalogs.
In those days, many manufacturers returned from their pilgrimage empty handed. With thousands of vendors already, and the pressure to support their preferred vendors, there was little incentive to add new vendors or products that didn’t originate from an already established vendor.
Manufacturers who couldn’t get their products to market via the traditional route either is set up a web site and sold directly to end users, or sold through regional distributors who were more than willing to get their hands on a hot new product not sold by the major distributors.
Manufacturer Marketing – 2018
Today, the big distributors have created creative ways to buy products from anyone willing to sell these types of products. These are typically referred to as “market source” or 3rd party purchasing services. If you are a manufacturer and one of the big distributors signs a contract with one of your customers, you have a chance to retain your existing business. There is also a potential upside since your products will be discoverable on their web site.
However, no manufacturer is going to be satisfied with a seller who is content simply to take an order for an item. The bargain has always been that in return for being able to purchase the product wholesale, that you will sell the product. Smaller distributors have emerged as a great option for manufacturers because they have the incentive to actually sell and have a close relationship with the customer.
How can a manufacturer help distributors sell their products?
As a distributor and former employee of one of the big distributors, I have witnessed firsthand the many ways in which manufacturers interact with distributors. Here are some of my suggestions and thoughts.
The distributor is your customer!
If an end user contacts you with a question about a product, answer promptly and with courtesy. Why should they be treated differently than any other customer? hen a distributor contacts you, it’s a selling opportunity! Treat it as such.
The distributor’s web site is only as good as the information you provide!
Everyone wants their products to be well represented, especially web shoppers. They want pictures of the product, complete and accurate descriptions, and full and complete specifications.
The manufacturer is responsible for the content. If left up to the distributor, the results can be very unsatisfactory! This should be an integral part of your marketing plan from day one. If your primary route to market is through distribution, your web site’s primary design criteria should be to support your distributors.
Think about what you are providing from the distributor perspective.
Let’s just use one example to illustrate the point here: Images. Unless you are selling chemicals, end users are going to want to see a picture of what they are buying.
There are two ways that distributors can get images. One way is for them to search on your web site by part number for the image, download the image, then tell their computer system how to associate that image with the entry of your product in their database It is very helpful if the name the image nameassociates it with the SKU (catalog number.) Here is an actual example of an image name: 1000ml_d9887fac-0554-4fd3-a690-5305df50a1df_1024x1024.jpg
This image name may make perfect sense to you, but the only way your distributor will ever be able to associate it with a product is by renaming it. This is labor intensive, and error prone.
A much simpler and cleaner way to do this is to have a downloadable repository of images for all of your products. If multiple SKU’s relate to a single image then create duplicates! Use Dropbox™ or some other free service to make these images available for download. Your products will be up on their web site faster and you will have control of the quality of the images. It’s a win-win! The same thing goes for PDF’s or any other supporting literature.
Want higher quality content for your products? Provide it pre-formatted!
For many products, tables are used to provide specifications. The only way to ensure that a table is displayed correctly is to use the HTML code that generates the table. Your webmaster constructed the tables on your web site so that they display correctly. The distributor’s webmaster can reproduce this quality if they have the code.
Anyone can get the code from a web browser. But again, these are labor intensive and repetitive steps. And again, you take a chance on the quality and content not being what you want to represent your product!
If you have tables or formatted text of any sort on your web site, then why not provide this as part of your distributor product introduction package?
Why delay things by providing data in the wrong format?
One of the most common gripes distributors have is getting price and information from a manufacturer in PDF format. It’s easy to understand why this decision was made. If pricing data is sent in PDF format rather than a spreadsheet, it can’t be changed. It’s secure. But for a distributor is that really a concern?
Excel format is the preferred vehicle to communicate pricing and data. The simpler you make it the better. One SKU = one row. Don’t imbed graphics or insert titles. Put links to your web site. Provide weights, dimensions, COO or any other data you have on hand. And why not go ahead and offer keywords!
Get out and visit a distributor!
As the owner of a distribution company representing nearly 100 vendors, you would think that my schedule would be full of manufacturers wanting to visit to educate us and bring more visibility to their product lines. The truth is that it is I am more like the Maytag repairman of TV fame.
If you are the owner of a small or mid-size manufacturing business then I challenge you to get out of your comfort zone and go visit some of your distributors – big and small. Are you in charge of Marketing? Get out of your office for awhile! You would never develop a product without consulting a customer to see if it was solving a problem, so why would you design a marketing strategy without seeing how it will get in the hands of the end users? Going to industry meetings like ILDA or LPA is not a substitute! Spread best practices. Share success stories. Motivate your distributors. And for heaven’s sake, just keep track of them!
Consider changing policies that may now be outdated.
There are several policies that have been around for a long time that you may wish to consider either modifying or abandoning altogether in light of the post-2004 marketplace:
- - Minimum order fees. If you set a minimum order charge and your competitors don’t, this is costing you orders and you need to re-evaluate the cost-benefit ratio.
- - Drop ship fees. These are a holdover from the days where a distributor was defined as a brick-and-mortar company who bought inventory, put it on the shelf and sold it. Many of the small to mid-size distributors today are sales agents. Most manufacturers today will drop ship without penalty.
- - Build-on-Demand. If you are an equipment manufacturer, this model works. If you are in consumables, it doesn’t. Plan on having adequate inventory on hand – especially products with a longer lead time such as a sterile product.
- - Shipping restrictions. It’s no secret that a lot of companies make money off their shipping charges. Many end users and distributors today know this and want products shipped on their shipping accounts. If you have policies in place that prohibit this, then you need to change.
- - All encompassing MAP policies. I am against MAP policies. However I fully understand why manufacturers have instituted these policies. My recommendation is that manufacturers who institute MAP policies do this wisely rather than globally. For example, if you sell spectrophotometers and you want to maintain the value of your brand, by all means do so! But if you also sell pipette tips then these should not be part of a global MAP pricing policy!
- - Ridiculous miscellaneous fees. My favorite here is the fuel surcharge – a true holdover from a bygone era. These are sometimes applied even if you are shipping on someone else’s freight account! You are in business to process orders, why charge extra for doing so?
Although the lab supplies market has evolved a great deal since 2004, a significant percentage of the nearly 9,000 vendors in the U.S. have not taken full advantage and keep on doing business in the traditional ways. They are missing a golden opportunity to take advantage of the ongoing changes to accelerate the growth of their businesses!
Those manufacturers who recognize these trends and cultivate and better serve the small to mid-size distributor market will be the leaders of tomorrow.