Theoretical education: establish correct concepts and correctly view the relationship between manufacturers and dealers
- Misunderstandings among business personnel about the manufacturer-dealer relationship
People's concepts determine their behavior. Most sales representatives' inefficiency in dealer management is not just a skill issue; they haven't figured out who they are—what role they should play as a manufacturer's sales representative when dealing with dealers—and they haven't positioned the relationship between the manufacturer and the dealer correctly. As a result, there are:
—Extreme leftists (currently fewer and fewer such salespeople) Concept: The relationship between manufacturers and dealers is a buying-selling or trade relationship. Behavior: Use every possible means and sweet talk to get dealers to stock up. As long as sales targets are met and payments are collected, everything is fine and they disappear. As for how the dealer's goods are selling, at what prices, where they are sold, whether there is any risk of expiration—none of that is my concern!
—Extreme rightists (over 80% of salespeople fall into this category) Concept: Dealers are customers, and customers are God. Dealer management is about building relationships; building relationships is about loyalty and brotherhood; the more you drink, the more you sell; the better the relationship, the better the sales. Behavior: · When meeting a dealer, they always say the same three things: "How's business? Want to order more? This time it's buy 100 get 2 free, how many do you want?" · They hang around dealers all day, chatting about everything under the sun, running around doing small favors, and eating and drinking with dealers—building relationships. But they never discuss the next steps for the market, don't track the dealer's inventory by item, don't help the dealer analyze the market or plan market strategies, and know nothing about the dealer's selling prices or downstream network... · They suffer from "soft bone disease" in front of dealers, turning a blind eye to various malicious operations by dealers (such as price undercutting, cross-region dumping, and withholding expenses). They even collude with dealers to dump goods across regions to boost sales, jointly complain to the company for more policies, hoping to exchange this for "sales" and "relationships"...
Obviously, both types of salespeople will not achieve good results in dealer management: The extreme leftists will only focus on pushing stock without service, and dealers may even despise or resent the manufacturer (sales rep) (the manufacturer is irresponsible, always making me stock up more, but they don't care if I can't sell). The extreme rightists have good personal relationships with dealers, but their management of dealers only stays at the level of "pleasing" customers. In the end, both approaches lead to the same result: · The manufacturer's sales rep's market work is limited to dealer visits, with no knowledge of the dealer's downstream network, inventory, prices, etc., and the market is completely controlled by the dealer. · The manufacturer's various terminal promotion resources are completely handed over to the dealer for execution, without guidance or monitoring, resulting in ineffective promotions and no improvement in terminal performance. · Malicious operations by dealers such as cross-region dumping and price undercutting cannot be effectively stopped, leading to chaotic market pricing. · ...
So, from the perspective of a salesperson, how should the relationship between manufacturers and dealers be positioned?
I have asked this question many times in training classes, and the answers from trainees are mostly the popular and fashionable phrases in the marketing world—manufacturers and dealers have a "fish-water relationship," a "husband-wife relationship," a "win-win relationship," and even some sales managers answer, "Dealers are the bread and butter of manufacturers," "They are more than family!"
I entered the marketing industry twelve years ago and started managing dealers. Twelve years later, I teach others how to manage dealers well. My twelve years of practical experience have verified that there is both cooperation and conflict between manufacturers and dealers. The manufacturer's sales representative must not only actively serve and strongly support dealers, but also often use wisdom (guiding dealers to act according to the manufacturer's market strategy), courage (sanctioning malicious operations and customers who do not listen to advice), and even ruthlessness (decisively eliminating and even taking legal action against customers who maliciously disrupt the market or owe payments). The relationship between manufacturers and dealers is absolutely not a simple and lovely husband-wife, win-win, or fish-water relationship. It is precisely this kind of one-sided public opinion in the marketing world that misleads salespeople, causing them to suffer from "soft bone disease" in front of dealers, mistakenly expecting to exchange good personal relationships and tolerance of dealer violations for "customer relationships," while neglecting the work that can truly create benefits for dealers, improve their business conditions, and shape professional customer relationships (such as assistance, guidance, and control over dealer inventory, prices, networks, internal management, and market operations). In the end, it harms themselves (business skills cannot improve), harms the manufacturer (market chaos, loss of sales), and harms the dealer (products cannot be built up, and dealers only seek short-term gains without growth).
- Analyzing the differences in interests between manufacturers and dealers
What is the essence of the relationship between manufacturers and dealers? Let's first analyze whether the interests of manufacturers and dealers are the same.
In transactions between manufacturers and dealers, what conditions do dealers most want from manufacturers?
Financial risk: · Goods on credit first, payment later. · Low prices, high rebates. · Small order quantities, fast turnover. · Ability to return goods at any time.
Greater exclusive distribution rights: · Ideally, "China's sole agent for ten years unchanged";
More support: · More manpower investment from the manufacturer. · More promotion fees, advertising, and promotional support;
Better service: · Product quality without issues, and the manufacturer handles customer complaints promptly. · Timely delivery and exchange of defective goods.
Others: · More training and guidance from the manufacturer. · Strong brand power gives dealers face. · Products can fill gaps in the dealer's current product line. · ...
In transactions between manufacturers and dealers, what do manufacturers most want dealers to do?
Reduce manufacturer costs: · Payment first, then delivery. · Execute according to the manufacturer's prices, no undercutting or overpricing. · Ideally, order full truckloads to reduce the manufacturer's distribution costs. · Meticulous product sales and inventory management, try to avoid returns.
More focused investment: · "I give you exclusive distribution rights, but you should ideally be an exclusive distributor," focusing only on my product.
Greater market promotion capability: · Dealers ideally have mature networks, sufficient manpower and resources, so the manufacturer doesn't need to invest much, and the dealer can promote the market on their own.
Better cooperation: · Dealers ideally "fully cooperate" with the manufacturer's market strategy. · No cross-region dumping, no price undercutting, sell all product items, and seriously execute the manufacturer's promotional plans...
From the above comparison, it is clear that the so-called "husband-wife relationship" and "fish-water relationship" between manufacturers and dealers actually have many fundamental conflicts of interest.
For example: The manufacturer wants payment before delivery, while the dealer wants delivery before payment; The manufacturer wants the dealer to be an exclusive distributor, while the dealer wants exclusive distribution rights; The manufacturer wants the dealer to execute at specified prices, while the dealer only wants to maximize profits. ...
It is precisely because of these conflicts of interest that mutual harm often occurs in transactions between manufacturers and dealers. Dealers often bring many negative impacts to manufacturers.
For example: · Holding exclusive distribution rights but not being an "exclusive distributor," paying insufficient attention to the product, or even "pretending to distribute," while focusing on selling competing products (because they have higher profits). · Cross-region dumping, price undercutting, price overpricing, and withholding various expenses. · Only selling best-selling high-profit products, not promoting new products. · Insufficient transportation, manpower, and capital, restricting the manufacturer's market development; not supplying supermarkets for fear of tying up capital; not delivering to small shops because freight costs are not worth it. · Network control falls into the hands of dealers, who use the market to dictate terms to manufacturers and constantly make unreasonable demands...
Similarly, manufacturers' violations often harm dealers. For example: · Overstocking: The manufacturer's sales staff pushes too much stock onto dealers, leading to expired products that cannot be returned; · Stockouts: Dealers work hard to promote new products, and just when sales are rising and it's time to "reap the harvest," the manufacturer runs out of stock, causing profit losses; · Price losses: A drop in factory prices devalues the dealer's inventory; the manufacturer's poor market control leads to cross-region dumping and price undercutting, causing price inversion and devaluation of inventory; · Discount fulfillment: Rebates, freight subsidies, and promotional expenses advanced by dealers are not reimbursed in a timely manner; · Product quality issues and too many counterfeit products; · The manufacturer encourages dealers to sell on credit extensively, leading to unpaid receivables; · The manufacturer frequently changes dealers...
With fundamentally conflicting interests and frequent "mutual harm," the relationship between manufacturers and dealers is not that simple and lovely!
If manufacturers and dealers have a fish-water relationship, then sometimes it becomes a relationship between "fish" and "boiling water"!
If manufacturers and dealers are like a married couple, then sometimes they are "in the same bed but dreaming different dreams"!
- Why do manufacturers use dealers to develop markets?
Since there are many conflicts of interest between manufacturers and dealers, and dealers often bring negative impacts to manufacturers, why do manufacturers still use dealers to develop markets? Why don't manufacturers hire more staff, gradually eliminate dealers, and set up more offices, branches, and direct-operated markets? The reasons are as follows:
Insufficient manpower: Manufacturers cannot quickly recruit and manage a large number of marketing talents to form a mature sales team. There are plenty of people in the market, but truly skilled ones are rare. Even if they can be recruited, they may not be manageable. Blind expansion, once management loses control, the consequences would be disastrous.
Unfamiliarity with the market: Lack of familiarity with basic market data, customer networks, and market environment in new markets increases the difficulty of direct operation.
High costs: Direct operation faces huge upfront market development and pre-compensation costs, tax costs, and account receivable risks. Dealers, on the other hand, are "local tigers" with cheap labor, mature customer networks, and intricate relationships with local governments. Their cost of developing markets is much lower.
Some markets cannot be directly operated by manufacturers: Enterprises cannot directly operate all supermarkets because supermarkets' payment delays are two to three times the sales amount, which most enterprises cannot bear. Therefore, most enterprises must rely on dealers for supermarket channel supply. Enterprises also cannot bypass dealers to deliver directly to retail stores. In China, a city with a population of four to five million can have over 20,000 retail stores. Delivering directly to these stores would "bankrupt" the enterprise.
Now it is clear that many fundamental interests of manufacturers and dealers conflict, and they often bring negative outcomes to each other. Relying purely on large dealers and agents would make the manufacturer very passive. Intensive distribution and direct operation are trends, but they can only be implemented gradually. Moreover, manufacturers cannot completely bypass dealers. In the past, present, and future, manufacturers will rely on dealers to some extent to do business. The development trend is: · When an enterprise enters an unfamiliar market, direct operation costs are too high, so it uses dealer strength to enter the market at low cost and achieve sales. · As the enterprise's strength and familiarity with the local market increase, most enterprises will not be controlled by large dealers. Instead, they will gradually increase their own manpower investment, divide distribution rights into smaller areas for intensive distribution, and then set up offices, branches, and direct-operated markets to increase market control. · Manufacturers can only have "limited direct operation" in the market. Supply to most supermarkets and delivery to countless retail stores will still rely on dealers.
- Analyzing the essence of the manufacturer-dealer relationship
Through the analysis in the above three sections, we can now clearly demonstrate the essence of the manufacturer-dealer relationship. For a salesperson, correctly understanding the manufacturer-dealer relationship includes the following three layers:
Dealers are the entry ticket for manufacturers into unfamiliar markets. Manufacturers must rely on dealers' strength to start new markets at low cost. As the product grows in the local market, the manufacturer should gradually increase local manpower investment and market control to avoid the market being controlled by dealers. As a salesperson, when developing new markets, choose dealers carefully, find customers who can truly help the enterprise quickly develop the market. In the later market management process, pay attention to going deep into the market front line, guide dealers in terminal sales, and at the same time, investigate and master the dealer's and key secondary wholesalers' distribution networks.
Dealers are the manufacturer's sales managers. Manufacturers seek dealers mainly to use their mature networks to quickly distribute products. Incorporate the dealer's network into the manufacturer's sales network. The actual sales work locally is achieved through the dealer's people, vehicles, goods, money, and network. The dealer is the real local sales manager. The manufacturer's sales representative's role is not to personally help the dealer sell goods, but to persuade, communicate, train, guide, and restrain this "sales manager" (the dealer) to more actively and proactively use his various resources (the dealer's people, vehicles, goods, money, and network) to sell the company's products.
Dealers are the manufacturer's commercial partners. Dealers and manufacturers have many fundamental interests that are inconsistent. They are commercial partners, the two parties on opposite sides of the negotiation table. The manufacturer's sales representative represents the manufacturer to do business with the dealer. When the interests of the manufacturer and dealer align (the dealer cooperates with the manufacturer's strategy to develop the market), the sales representative should provide enthusiastic service and strong support, minimize the negative impact of the manufacturer's violations on the dealer (such as untimely delivery, overstocking, stockouts, etc.), and help the dealer create benefits. When conflicts of interest arise (various malicious operations by the dealer), the sales representative should adhere to principles and protect the manufacturer's interests (such as collecting payments, stopping dealers from undercutting prices, "forcing" dealers to supply supermarkets, and replacing unqualified dealers, etc.)
Understanding the threefold meaning of the manufacturer-dealer relationship, sales representatives can position their relationship with dealers correctly:
The relationship between the manufacturer's sales representative and the dealer is like the relationship between the Communist Party (manufacturer) and its special envoy (sales representative) and local armed forces (dealer). The Party (manufacturer) sends a special envoy (sales representative) to the local armed forces (dealer) to influence the local armed forces (dealer) through wisdom and professional communication skills, making the local armed forces (dealer) follow the Party (manufacturer). The local armed forces' dozen people and seven or eight guns (the dealer's people, vehicles, goods, money, and network) all strive in the direction of the Party's line (the manufacturer's market strategy).
The highest standard and ultimate purpose of the manufacturer's sales representative managing dealers well is:
Through the sales representative's professional skills, coordinate the interests of these two fundamentally different individuals, guide the dealer's people, vehicles, goods, and money to invest more in the manufacturer's market work (i.e., if the dealer has ten people, eight are selling our products; if ten vehicles, eight are delivering our products...). On the premise of realizing the manufacturer's fundamental interests (such as dealers paying on time, not dumping goods or disrupting prices, not withholding market expenses, and promoting all product items), help the dealer create maximum benefits and achieve a relative win-win situation between the manufacturer and dealer.
Review of this article and preview of the next:
This article mainly provides theoretical training to correct salespeople's concepts. Through the analysis of three issues—"salespeople's misunderstandings about the manufacturer-dealer relationship," "interest differences between manufacturers and dealers," and "the real reasons why manufacturers use dealers to do business"—it draws conclusions about "the essence of the manufacturer-dealer relationship" and "the highest standard and ultimate purpose of sales representatives managing dealers."
The market is made through action; salespeople most need action-decomposed training.
Starting from the next article, we enter the first stage of practical dealer management training—"How to Choose a Good Dealer."
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