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Route to Market & Supply Chain Blog

Distributor Selection: Mastering the Catalyst Phase

Posted by Michael Thompson on Wed, Jul 03, 2024

The dictionary definition of a Catalyst is:

  • An agent that provokes or speeds significant change or action.

Using our A-B-C of Route to Market model, the Catalyst Phase is when we execute or as we sometime call it ‘How to Win’.

For distributor selection, it is when we engage our chosen distributor.  And it’s not just about the contract.

As a reminder, my previous post on Distributor Selection covered:

·         The Assessment Phase

·         The Blueprint Phase

To reiterate a previous assertion, it is vital to use a systematic approach when selecting new distributors.  If you don’t, you risk choosing the wrong distributor partner and, for example, the market entry fails to meet expectations.

execution FMCG distributor partnership

Catalyst Phase Overview

The Catalyst Phase is the execution stage where the selected distributor(s) are integrated into your distribution network and the strategies developed during the blueprint phase are put into action. This phase focuses on ensuring a smooth implementation, ongoing support, and continuous improvement. Importantly you must keep your distributors honest – see Joint Action Plan later on.

External Perspective:

  • Market Activation & Demand Creation:
    • Product Launch: Coordinate with distributors to plan and execute product launches. Ensure they have the necessary inventory, marketing materials, and training to effectively introduce your products to the market.
    • Marketing Campaigns: Implement marketing and promotional campaigns to support the launch. Collaborate with distributors on localising marketing efforts to better resonate with the target audience.
  • Customer Engagement:
    • Feedback Collection: Work with distributors to gather customer feedback and market insights. Use this information to make real-time adjustments to your strategies and offerings and, critically to your Demand Creation activities.
    • Customer Support: Ensure distributors are equipped to provide excellent customer service. Establish protocols for handling customer inquiries, complaints, and returns. Make sure that you monitor this and measure performance against agreed targets.

Internal Perspective:

  • Performance Monitoring:
    • KPIs and Metrics: Establish key performance indicators (KPIs) to monitor distributor performance. Track metrics such as sales volume, market share, inventory levels, and customer satisfaction.  The key metrics are usually related to coverage – numeric distribution (percentage of outlets stocking a product) and weighted distribution (percentage of outlets stocking a product, weighted by the volume of sales in the outlets).
    • Regular Reviews: Conduct regular performance reviews with distributors to assess progress, address challenges, and identify opportunities for improvement. Use data-driven insights to guide these discussions.  The key reference documents are Joint Business Plans (JBPs) and Joint Action Plans (JAPs) – see later.
  • Continuous Improvement:
    • Training and Development: Provide ongoing training and development programs to keep distributors updated on new products, sales techniques, and market trends. Encourage continuous learning and improvement.
    • Process Optimisation: Continuously evaluate and optimize processes related to logistics, inventory management, and sales operations. Implement best practices to enhance efficiency and effectiveness.
  • Logistics and Supply Chain:
    • Supply Chain Coordination: Ensure seamless coordination between your supply chain and distributor operations. Address any logistical challenges promptly to maintain product availability and timely delivery.
    • Inventory Management: Monitor inventory levels closely and adjust supply chain strategies to prevent stockouts or overstock situations. Utilize inventory management tools and techniques to optimize stock levels.
    • Supply Chain Integration. Ensure your supply chain operations are integrated into your new RtM processes. Key here is integrating demand signals from distributors into your companies Demand Review as part of Sales and Operational Planning.  The key data here are sales out of the distributor and distributor stock levels.

Go Distributor Go:

  • Contractual Engagement
    • Heads of Terms.  Having chosen your distributor, the next immediate step is to agree the key terms of the agreement such as front margin, rebates, back margin (performance related), stock holding, payment terms, service levels, key metrics and targets, promotional spend, etc.  When this is agreed a simple Heads of Terms document can be executed. Whilst not legally binding, it is usually agreed quickly and the engagement can continue into execution on a goodwill basis whilst the Contract ‘catches up’.
    • Contract. The legally binding document to support the new trading relationship now needs to be executed.  This is usually a time for patience – lawyers are involved.
  • Implementation Support:
    • Technical Assistance: Provide technical support to distributors, including help with integrating their systems with your CRM, ERP, and other technology platforms. Ensure smooth data exchange and operational efficiency.
    • Marketing Support: Offer ongoing marketing support, such as co-branded campaigns, promotional materials, and joint events. Help distributors effectively market your products and drive sales.  They will not do this unassisted.  They just won’t.
  • Relationship Management:
    • Regular Communication: Maintain open and regular communication with distributors. Foster a collaborative partnership by involving them in strategic discussions and decision-making processes.  The minimum requirement is one weekly call and one formal monthly minuted meeting.
    • Conflict Resolution: Establish mechanisms for resolving conflicts and addressing issues promptly. Maintain a positive and productive relationship with distributors.
  • Key Operation Documents – Meet the JBP and JAP:
    • Joint Business Plan (JBP): Each party needs to be clear about what is expected of the other.  Like any new business arrangement, a plan is needed.  The JBP is a shared strategic document that provides a roadmap to delivering the elements agreed in the Trading Terms & Conditions (TTC) between the Producer and the Distribution Partner (DP). It is long-term in nature and details the joint ambition, and what each party needs to do to fulfil that ambition. One of the fundamental goals of any JBP is to bring clarity to both parties, remove any ambiguity and make sure the key individuals across both organisations understand which party does what (role definition is key), when, where, how, and why. This understanding must begin at the top of both organisations. The JBP should be formally reviewed and updated every quarter.
    • A Joint Action Plan (JAP) is a shared operational document that details the cycle of activities needed to deliver the elements agreed in the JBP between the Producer and the DP. It is short term focused and should detail the specific monthly actions and activities that must take place, including what each party needs to do to execute the plan. JAP must also bring clarity for both parties. It must remove any ambiguity and make sure the key operational individuals across both organisations understand the detail of which party does what, when, where, how and why. The JAP must map out the specific actions that take place to deliver the strategic JBP targets.   The JAP should be formally reviewed and updated every month. Continuous Adaptation: Use distributor feedback, especially from the monthly JAP meetings to continuously adapt and refine your route to market strategy. Be responsive to changing market dynamics and distributor needs.

You are now ready to go; to turbo charge your sales with your new Distributor Partner.

Remember our definition of a Catalyst?  An agent that provokes or speeds significant change or action. Thus, this Catalyst Phase is critical for realising the full potential of your route to market strategy and achieving sustained growth.

A final word.  When you make a start with your new distributor, it is just the start. Like all relationships, it needs time and effort to growth and flourish to the mutual benefit of both parties.

What we do at Enchange Supply Chain & RtM Consultancy?

  • Deliver sales growth for our clients.
  • Work globally, with our local experts.
  • We are Route to Market & Supply Chain experts.

At Enchange our passion is helping companies improve their route to market and supply chain so they can sell more, at a higher margin and lower cost.

What's your biggest challenge in executing distributor partnerships? Share your Catalyst phase hurdles below. Let's brainstorm solutions and learn from each other's experiences in activating new distributor relationships!

Tags: Route to Market, Michael Thompson, RTM, RtM Strategy, The ABC of RtM

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