---
title: "Dealer Management Actions Breakdown (Part 4)"
description: "This section continues the discussion on dealer selection criteria, detailing practical methods for assessing a dealer's strength, market capability, management ability, reputation, and cooperation willingness, with specific actions for each."
author: "魏庆老师"
publisher: "New Distribution"
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published: "2015-08-08"
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# Dealer Management Actions Breakdown (Part 4)

> This section continues the discussion on dealer selection criteria, detailing practical methods for assessing a dealer's strength, market capability, management ability, reputation, and cooperation willingness, with specific actions for each.

Review of Previous Main Content
In the previous section, we learned the four major approaches to dealer selection and specific actions for judging a dealer's marketing awareness. The main points are as follows:

Approaches to dealer selection: Choosing a dealer is like choosing an employee; strict entry and lenient exit; comprehensive evaluation; selection should match the company's market development strategy; weigh size and suitability—what is suitable is best.

One of the dealer selection criteria—methods and actions for judging marketing awareness:
· Ask the dealer about the sales situation of each product category they currently represent.
· Ask the dealer about the basic conditions of the local market.
· Ask the dealer what support they need.
· Observe the dealer on-site for two hours when they open in the morning or close in the evening.

This section will continue to explain the standards and specific judgment methods and actions for dealer selection.

Practical Action Training: How to Choose the Right Dealer (Part 2)

Dealer Selection Criterion 2: Strength Verification
Explanation: Choosing a dealer is like choosing an employee. Understanding the dealer's marketing awareness is like observing a new employee's work attitude and professionalism, while understanding the dealer's strength is like examining a new employee's educational background.

Action Breakdown:
1. Observe the dealer's store scale: Understand whether the dealer's business is "too poor."
Specific actions: Visit the dealer's store, observe product display, office on-site management, whether business calls are frequent, and whether there are many customers picking up goods.

2. Understand the dealer's warehouse size and inventory capital: Infer the dealer's business scale and working capital.
Specific actions:
a. Take a tour of the dealer's warehouse and visually estimate its area. If a dealer is not strong enough and business is not good, they will not spend money renting a larger warehouse.
b. While visually estimating the warehouse area, secretly count the dealer's inventory quantity, mentally calculate the value of the dealer's inventory products, and thus roughly infer the dealer's working capital—generally, a dealer's working capital is 2-4 times the inventory value.

3. Understand the dealer's transportation capacity and network visibility: Measure how much of the dealer's strength can truly play a role in the manufacturer's market development.
Special note: If a dealer says, "I have 20 eight-ton trucks, and in the northern eight provinces, no major player in the same industry doesn't know me," can such a customer be considered to have sufficient transportation capacity and high visibility? No. On the contrary, such a customer should not be chosen! (If he is known in the eight northern provinces, he must be a major cross-regional seller!) For the manufacturer, a dealer having many trucks does not necessarily mean his transportation capacity is large; a dealer being "famous in the industry" does not necessarily mean he has good network visibility—we need to examine the dealer's "visibility and transportation capacity useful for the manufacturer's market development." For example: A dealer has twenty eight-ton trucks, but we want him to represent large-packaged juice (mainly through supermarket channels). Then the dealer's transportation capacity that can actually be used is zero! Because: First, supermarkets are mostly in the city, and eight-ton trucks cannot enter the city. Second, supermarkets require high-frequency, small-batch deliveries, and the receiving procedures are complex, with long waiting times. Using eight-ton trucks for supermarket deliveries would cause great waste. Supermarket deliveries require small box trucks; the dealer's "twenty eight-ton trucks" are useless for the supermarket channel. A dealer may be well-known in the industry, but investigation reveals that he specializes in the rural market outside the city; his trucks, personnel, and network are mainly distributed in neighboring counties and cities. The manufacturer wants to use him to do the city terminal market. Although this customer is famous among major players in various cities and counties, his visibility in the manufacturer's target market is zero.

How exactly to measure the dealer's transportation capacity and network visibility useful to the manufacturer?
Specific actions:
a. Before developing a new market, clarify your channel and regional goals. For example: plan to sell products in the city's schools, supermarkets, hotels, and wholesale channels.
b. Visit sales points in the target market channels and ask store owners/purchasers: "Do you know XX wholesale department? Has he often supplied you before? Who delivers your goods?"
By doing the above, you can obtain the dealer's true transportation capacity (number of vehicles distributed in the manufacturer's target terminal market) and visibility (visibility among the manufacturer's target terminal sales points) that are useful for the manufacturer's market development.

4. Understand the dealer's financial status: Preliminary judgment of the dealer's repayment ability.
Specific actions:
a. "Chat" with the store owner, bring up the topic of "supermarkets owe too much money now," and see if the dealer is worried about accounts receivable, inferring his financial condition.
b. Ask the dealer's employees indirectly whether wages are paid on time and in full.
c. Ask salespeople from other manufacturers whether the dealer has a history of malicious non-payment.
d. Ask other wholesalers in the city and neighboring counties/cities whether the customer has a history of malicious non-payment.

Dealer Selection Criterion 3: Market Capability
Explanation: Verifying the dealer's market capability is like verifying a new employee's actual work ability and performance in previous companies.

Action Breakdown:
1. Understand the dealer's downstream network and wholesale tier.
Term explanation: The number of intermediate distribution transfers through which a dealer distributes goods to terminal sales points is called the wholesale tier. (For example, if a dealer has the ability to directly serve terminal retail stores, the dealer's wholesale tier is short. Conversely, the dealer's wholesale tier is long.)
Analysis: Is a "long" or "short" wholesale tier better? Actually, each has pros and cons: If the wholesale tier is short (dealer can directly serve retail stores), it is easier to increase the distribution rate of new products. If the wholesale tier is long (dealer has a fixed downstream customer network in the second and third tier markets), then through promotions on mature products in the second and third tier channels, sales can quickly increase. If a dealer only has a short network, the larger the regional market they represent, the easier it is to lose sales (the dealer's direct operation capability cannot cover the entire market). Conversely, if a dealer only has a long network, they can only do mature products, cannot promote new products, and are prone to price-cutting in the second and third tier markets. Therefore, when selecting a dealer for a larger region (prefecture-level city and above), it is best to have a combination of long and short wholesale tiers, so that they can directly serve retail stores, quickly increase distribution rates for new products, and also have high prestige in the second and third tier markets to conduct channel promotions to accelerate sales of mature products.
Specific actions: You can learn this by checking the dealer's customer list, tracking the dealer's delivery vehicles, asking the dealer's employees, and asking wholesale market/terminal customers.

2. Understand the dealer's current brand performance and market performance.
Specific actions:
a. Understand the main brands the dealer currently represents, and select sample brands.
b. Visit terminals to investigate the terminal distribution rate and visibility of the brand's products—verify the dealer's terminal control ability.
c. Visit wholesalers at all levels to investigate whether the brand's prices at each tier are stable (whether there is malicious price chaos or price-cutting)—verify the dealer's price control ability over downstream customers.
(Note: Cross-regional selling and price chaos are "chronic diseases" in marketing. To date, no marketing expert has been able to cure this problem, but many salespeople and dealers say, "Other markets are chaotic, but here we have less price-cutting." A dealer is a manager of a regional market. If he follows up promptly and manages downstream customers effectively, price-cutting will naturally be much less. In other words, if a market's prices are extremely chaotic, it also indicates the incompetence of the regional agent.)
d. Find out what the latest new product from the brand manufacturer is, and use the same method to observe whether the dealer has successfully built up this new product.
(Note: Coca-Cola's high distribution rate is mostly not the dealer's credit—mature products have strong pull, so the distribution rate cannot be low. When evaluating a dealer's market operation effect for a brand, don't forget to check whether he has built up the distribution rate of the brand's new products and controlled prices well.)

3. Check the dealer's relationship with local KA (Key Accounts).
Explanation: What is KA? The sales point with the largest sales volume and best image in the local market (e.g., hypermarkets). KA generally has high entry barriers (e.g., store fees). If the newly selected dealer has had close business dealings with KA, the manufacturer can "borrow a shell to list" (quickly enter supermarkets, pay less or even no entry fees, and use the dealer's relationship to obtain favorable terms for display and promotions).
Specific actions: Visit KA stores to understand whether the dealer's current products are sold in KA, their sales volume and terminal performance in KA, and whether they are valued by KA.

Dealer Selection Criterion 4: Management Ability
Explanation: As discussed in Section 2 "Analysis of Manufacturer-Dealer Relations," the dealer is actually the enterprise's local sales manager (the local market's sales achievement and market management are completed by the dealer). Investigating the dealer's management ability is like investigating a newly hired sales manager's "management work experience."
It is common to see many dealers who are "worth millions" but whose management ability remains at the level of "street vending."
Examples:
1. Logistics management: no inventory statistics, no classified stacking, no first-in-first-out. One day, opening the warehouse door, they exclaim, "Oh! The warehouse is half empty!" So they drive to the provincial capital to stock up. What to stock and how much is based on feeling (because there are no reports or statistics on what is in the warehouse and how many pieces). After returning, they stack the goods without first-in-first-out, then suddenly scream, "Oh no! There are still 300 boxes of last year's juice in the back—already expired! Oh no, a certain instant noodle is out of stock, why did I forget to order it again?!"
2. Fund management: no basic accounts, no separation of income and expenditure. They just sell goods, collect money, and throw it into a drawer. Daily expenses and purchase funds are taken from it. Even the wife and children take money from the drawer as needed. At the end of the month, they cannot calculate whether they made a profit.
3. Personnel management: no basic systems. The two salespeople are a nephew and a nephew. Lateness, early departure, talking back, loafing, and often quarreling with customers are commonplace. "Nephews" stealing "uncle's" goods to exchange for cigarettes is even more natural.
4. Information management: customer data either does not exist, or is written on the edge of an old New Year picture on the wall. At best, there might be a small notebook recording customer details. Detailed information on downstream customers' strength, area, purchase volume, etc., is all in the boss's head. Accounts receivable are a pile of IOUs, a mess of accounts with no detailed records of debts or aging analysis.
Analysis: Most dealers are individually operated. Being too formal can become a cost burden, but some basic management must be followed, otherwise it directly causes losses and harm. (For example, a typical dealer loses tens of thousands of yuan each year due to improper inventory management—lost, damaged, expired, or out-of-stock goods—and they may not even feel it.) If a dealer cannot manage even his "small shop" properly, he cannot shoulder the responsibility of developing and managing the market.
Action Breakdown: Check the dealer's management status of personnel flow, logistics, capital flow, and information flow. Require at least the following basic management abilities:
1. Warehouse products are stacked by category for easy inventory counting; inventory numbers are counted at least once a week.
2. Personnel have clear division of labor; business personnel's responsibilities and performance evaluation methods are defined.
3. Accounts receivable have detailed records.
4. There is a basic daily business ledger and expense account; it is best to implement a system of separating income and expenditure.
5. There are relatively formal and complete customer detail files.

Dealer Selection Criterion 5: Reputation
Explanation: When recruiting new employees, companies need to understand their performance at the original unit and why they left. When selecting a dealer, we also need to understand the dealer's reputation among peers (other wholesalers) and in the same industry (other cooperative manufacturers), thereby understanding the dealer's business ethics.
Action Breakdown:
1. Understand peer reputation: Go to other wholesalers in the city (and nearby cities/counties) and ask, "Have you cooperated with Boss Zhang before? How is his credibility?" You might hear comments like: "This guy can't work with. He gives us goods at 35 yuan/box, then turns around and cuts prices at 34 yuan/box himself, and even leads in selling counterfeit products..."
2. Understand industry reputation: Especially if you learn that this dealer once cooperated with a well-known manufacturer and then parted ways, you must make an effort to find out the reason for the split: Was it because the manufacturer's market cultivation led to a normal change? Or did the manufacturer eliminate him due to price-cutting, cross-regional selling, or poor market performance? Or was it because he intercepted promotional resources, owed payments, leading to conflict and even a break?
3. Special note: Not only should you understand the dealer's own reputation, but also the reputation of his partner. (The so-called dealer partner refers to a person who can significantly influence the store's product operation, promotions, payment settlement, etc., and this person is often the dealer's wife.) Many times, when you contact the dealer, you feel everything is fine, but once cooperation begins, you find that the dealer is mostly out expanding business, and the manufacturer's ordering, delivery, payment collection, promotions, and market services all need to be handled with this partner. If this partner has a "bad reputation" in the market, you should carefully consider whether to cooperate with this dealer.

Dealer Selection Criterion 6: Cooperation Willingness
Explanation: A master's degree holder will not last long as a direct salesperson because he is not interested in the environment the company provides. Similarly, a dealer will only sincerely cooperate with the manufacturer's market work if he is interested in the agency rights the company offers. A dealer with poor cooperation willingness, no matter how strong his strength and network, cannot be used by the manufacturer.
Action Breakdown:
1. See whether the dealer warmly receives the manufacturer's personnel!
It is not about wanting to eat a meal the dealer treats or smoke a cigarette he offers (it is best to eat fewer meals with dealers; after two meals, unreasonable demands often follow). But if, after several consultations and when you are about to sign the agreement and ship goods, the dealer still treats the manufacturer's salesperson coldly, it shows he does not care about the agency rights, and of course will not invest much attention in the product's distribution and market development. Such a dealer must not be chosen.
2. See whether the dealer bargains with you on details of the distribution contract:
Only picky customers are real buyers. A dealer with genuine cooperation willingness will, on one hand, warmly receive the manufacturer's personnel, and on the other hand, repeatedly bargain on price, discounts, rebates, etc. If the dealer is always generous and readily agrees to the manufacturer's conditions without hesitation, the following situations may occur:
· The manufacturer uses a credit system, and the dealer has no sincerity to cooperate, only wanting to cheat a shipment of goods without paying.
· The product is a hot-selling commodity, and the dealer wants to take your product and sell it at a low price to quickly cash out and then do other business.
· The dealer is currently representing your competitor's product (and the competitor's product has higher profits). He unconditionally obeys to get your agency rights because he is afraid that if you find someone else to represent this product, they will compete with him in the future. Then he will hold your agency rights and focus more on selling the competitor's product, while your product will be buried in the back of the warehouse.

Preview of Next Section:
So far, we have learned about manufacturer-dealer relations, dealer selection approaches, standards, and actions. But after understanding these, most salespeople, when they go to the market, still unconsciously follow their mindset and find a big customer. People's thinking has inertia; "knowing is not equal to doing." How to further guide salespeople and correct their behavior? The next section, "Dealer Selection Precautions and New Dealer Evaluation Tools," will elaborate.

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