In a previous role as VP of Marketing at a company, two things were a headache: first, seeing the memos on my desk, because over 80% were requests for promotions, price cuts, and other policy support for primary dealers; second, visiting primary dealers, because most of them didn't want to discuss how to grow the market, but complained about the company's shortcomings and negotiated for conditions and policy support. I'm not unwilling to support dealers with policies, but I want to use policies where they matter most, fully leveraging their effectiveness, rather than simply turning them into benefits for primary dealers.
Any manufacturer faces various demands and conditions from primary dealers every day, which is indeed a tricky issue for marketing managers. If you agree casually, company expenses and costs increase, and other dealers will make similar demands once they learn of it; if you refuse, dealers complain and don't cooperate with marketing activities, even reducing sales of company products. As a marketing manager, when facing various demands and conditions from primary dealers, you should calmly analyze them and handle and respond strategically, turning the manufacturer's policy support into a powerful marketing weapon.
What demands and conditions do primary dealers often make to the company?
Primary dealers sometimes directly, and sometimes indirectly through sales representatives, make various demands and conditions to the manufacturer:
Price reductions. Primary dealers often claim prices are too high, products don't sell, business is bad, or that another manufacturer has cut prices, or that company products are more expensive than competitor products, or that there's no profit in distributing company products, to demand price cuts.
Monthly discount promotional support. Primary dealers often claim that secondary dealers and retail outlets have thin profit margins, low enthusiasm for distributing company products, or that the sales peak is coming and they should stimulate secondary dealers and retail outlets to increase inventory, or that company products are newly launched and need to stabilize new outlets, or that another manufacturer is running a promotion, to demand monthly discount promotional support.
Gift promotional support. Primary dealers often claim that another manufacturer is running a buy-X-get-Y promotion that impacts the market, or that company products are new and not well-known, or that consumers won't buy without gifts, to demand gift promotions like "buy X amount, get Y gift."
Advertising support. Primary dealers often claim that another manufacturer's ads on certain media are effective, or that company products lack awareness and need to expand it, or that competitors' advertising is strong and impacts their outlets and sales, to apply for advertising support.
New product additions. Primary dealers often claim that a competitor's product sells well, or that many consumers repeatedly ask for a certain product, or that old products have low margins and don't sell, or that the company lacks a certain product and they need to distribute a competitor's product, to demand new product additions.
Freight subsidies. Primary dealers often claim that other manufacturers offer freight subsidies, or that the distance from the factory is too far and freight costs are too high to bear, to demand freight subsidies.
Working capital support. Primary dealers often claim that other manufacturers provide working capital support, or that they've extended a lot of credit to secondary dealers and retail outlets and haven't recovered funds, causing cash flow difficulties, to demand working capital support.
Additional manpower. Primary dealers often claim that other manufacturers have many salespeople and expand markets quickly, or that they need help developing secondary dealers and retail outlets, to demand additional manpower.
Exclusive sales awards. Primary dealers often claim that other manufacturers offer exclusive sales awards, or that they are already close to exclusive sales, to demand exclusive sales awards.
Vehicle support. Primary dealers often claim that other manufacturers give small trucks or send a truck specifically for delivery, to demand delivery vehicle support.
Store rent support. Primary dealers often claim that other manufacturers help dealers pay store rent, or that their stores mainly sell company products, to demand help with store rent.
Reimbursement for inspection and PR expenses. Primary dealers often claim that due to product defects, inspections by industry and commerce, technical supervision, and other functional departments, they've incurred expenses to help the company smooth things over, to demand reimbursement for inspection and PR expenses.
Expanded sales territory. Primary dealers often claim that the company's designated sales area is too small and restricts their development, to demand expansion of their sales territory.
Why do primary dealers demand more and more, with growing appetites?
The demands and conditions primary dealers make to manufacturers are far more than the 13 types above. Primary dealers are making more demands and their appetites are growing. Why does this happen? Careful analysis reveals the main reasons:
Competitive manufacturer inducement. To gain a foothold in fierce market competition, manufacturers use various tactics to please, attract, and retain dealers and consumers. Frequent promotional activities and various tricks put pressure on primary dealers. If the manufacturer of the products they distribute doesn't respond with corresponding activities, it means losing customers and markets to competitors. So, to survive and protect existing markets, dealers can only turn to manufacturers for support.
Dealer profit erosion. Profit erosion is an inevitable trend in market competition. The era of dealer windfall profits is history. Many dealers constantly demand various policy support from manufacturers to gain more benefits.
Changes in primary dealers. After years of experience, with accumulated information, knowledge, and experience, primary dealers have become smarter and more business-savvy. With enhanced network control and financial strength, their negotiation skills and conditions are stronger.
Changes in consumers. Consumers are becoming more mature, with diversified, segmented, and complex demand trends. Manufacturers and primary dealers find it harder to grasp consumer behavior. To survive, primary dealers use manufacturer resources to run promotions and other activities to cater to, attract, and stimulate consumers.
Can primary dealers' demands be casually satisfied?
Mr. Wang, a friend of mine, was once the marketing director of A Beverage Company. Later, he started his own beverage factory. When developing the market, he targeted A Beverage Company's primary dealers with a combination strategy of "low prices + working capital + promotional policies + personal connections," and quickly won over more than 60% of A Beverage Company's primary dealers. His company's sales soared. Too-rapid success made him overconfident. He gave dealers whatever they asked for: promotions, price cuts, funds, entertainment. Later, when raw material prices soared, dealers held large amounts of funds that couldn't be recovered, so he couldn't purchase cheap raw materials in time, leading to higher costs and severe losses on many products. Raising prices was natural, but dealers resisted. Due to insufficient cash flow, prices couldn't rise, the company suffered heavy losses, and his beverage factory eventually went bankrupt. The dealers' debts remain unpaid to this day.
This case teaches us: success comes from primary dealers, and failure also comes from primary dealers. Mr. Wang's success was due to satisfying dealers' various needs, so they were willing to promote his products. His failure was due to over-indulging and catering to dealers' demands. Constrained by dealers holding large funds and controlling the market, squeezed by both raw material and product markets, the company collapsed.
Therefore, we can conclude: primary dealers' demands cannot be casually satisfied. Instead, they should be weighed against the company's funds, gross margins, brand awareness, market share, market control, and market stage, and support should be given according to capability.
How to handle primary dealers' demands and conditions?
- Clarify responsibilities and rights, fully delegate authority, strengthen sales representative training, and improve their judgment and adaptability.
Frequent demands for policy support from primary dealers are mainly the sales manager's problem. The sales manager hasn't clarified sales representatives' responsibilities and rights or hasn't fully delegated authority, keeping all power in their own hands; or hasn't trained sales representatives enough, lacking market control ability, so when facing dealers' demands, sales representatives, fearing trouble or offending dealers, don't dare to respond, and ultimately instigate dealers to directly ask the company for policy support or submit a memo for leadership decision. Therefore, sales managers should free themselves from trivial tasks, delegate certain authority to sales representatives based on their quality and ability, such as regional operations, customer decisions, promotional activities and expenses, and pricing. Sales representatives can make preliminary decisions on activities, policies, and methods within their authority. Sales managers should check, evaluate, and adjust the authority granted, and train sales representatives on how to strategically handle primary dealers' various demands and conditions within their authority. This fully mobilizes sales representatives' enthusiasm, allowing them to refuse unreasonable demands and submit necessary policy support requests via memo for leadership approval.
- Sales representatives should fully understand the market and clarify primary dealers' true intentions.
Sometimes primary dealers exploit the company's unfamiliarity with market information to exaggerate market problems, such as claiming a competitor's promotion with a cash discount of X yuan per case has a big impact, to obtain promotional concessions. Of course, sometimes the information is true and accurate. Therefore, manufacturers should neither fully accept nor fully reject dealers' policy demands. Sales representatives should stay close to and fully understand the market, closely monitor competitors and market dynamics. For policy demands, analyze objectively, clarify the true intention, and then decide whether to support. When approving policy memos, sales managers should also weigh the dealer's market conditions, company product sales, attitude toward the company and its products, development potential and value, and the policy's potential effect and operability, to determine whether to support.
- Sales representatives should dare to say "NO" to unreasonable demands.
When it's clear that a primary dealer's demand is unreasonable, different sales representatives may show four behaviors:
First: Cater to the dealer, immediately report false information to the company to obtain policy support.
Second: Directly say "NO" to the dealer, refusing the unreasonable demand.
Third: Play hide-and-seek with the dealer, giving no clear answer.
Fourth: Verbally agree but never actually implement the policy.
When knowing the demand is unreasonable, the second and third strategies can be used to directly or indirectly refuse. The second is generally suitable for strong-brand companies, where dealers dare not easily give up the brand because doing so would mean losing their livelihood. Sales representatives of strong brands can boldly tell dealers that the company cannot support such a policy. The third is generally suitable for weak-brand companies, where dealers' role is still significant, and relationships shouldn't be easily strained. They can use evasion or topic-shifting without giving a clear answer.
The first and fourth strategies should never be used. The first pleases the dealer but deceives the manufacturer, causing unnecessary expenses. The fourth deceives the dealer, and unfulfilled promises will increase dealer complaints.
- For reasonable policy demands, manufacturers should fully consider and appropriately support them.
After analysis and judgment, if the true intention of the dealer's policy demand is to further expand company product awareness and market share, stabilize and consolidate existing products and markets, and the policy's implementation is beneficial to the manufacturer's market competition, the manufacturer can provide certain policy support. At the same time, the manufacturer should attach conditions, such as sales targets or the share of company products in the dealer's total sales.
How to make dealers understand and accept the attached conditions? When approving a dealer's policy, the sales manager can write some conditions. Then the salesperson can take the memo and slightly exaggerate to the dealer that this policy was hard-won, that many dealers applied, but the company approved only this one, showing the company's high regard. Also, tell the dealer that although there are conditions, they are not a problem for the dealer. Finally, give the dealer a copy of the approved memo as the basis for execution, or if the memo isn't specific, clarify matters through a contract signed and sealed by both parties.
- Develop perfect policy plans to ensure implementation.
Often good policies and plans end up anticlimactic due to lack of measures. First, make full preparations, such as implementation plans, activity arrangements, activity funds, media and personnel contacts. Second, sales representatives should participate in implementation with dealers to ensure the policy's execution effect and prevent dealers from cheating or pocketing activity funds or gifts. Finally, objectively evaluate the implementation, including effects, successful experiences, and lessons learned.
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